Walk away

Walk Away

Describing a lease where the lessee must return the asset at the end of the lease's term. A walk away lease gives a great deal of flexibility to the lessee because the costs are all known in advance; likewise, the lessee does not need to predict the fair market value of the asset because he/she will not possess it. The lessor carries all risk. A walk away lease is most common with car loans. It is also called a closed-end lease.

L] ($1,000s) for closed-end leases with guaranteed buy backs were collected from advertisements appearing in June 1993 issues of the Greenville News, The State, and The Wall Street Journal newspapers.

0] agree with the predictions of equation (5), so there is tentative support for the hypothesis that standard approaches for evaluating the buy versus lease decision are biased against closed-end leases with guaranteed buy backs.

is $15,000 by assumption for both the closed-end lease with a guaranteed buy back and for the open-end lease.

just as for the closed-end lease with a guaranteed buy back.

Under this approach, the closed-end lease with a fair market buy back has only certain cash flows, while the other alternatives have both certain and uncertain cash flows.

The expected profit from exercising the option to purchase under the closed-end lease with a guaranteed buy back is equal to C.

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